Demand for Islamic products has driven the rise of Takaful, say experts.
Demand for Islamic products has driven the rise of Takaful, say experts.

Islamic insurance on the rise



Chakib Abouzaid does not like playing the part of the outcast. Nor does he want his burgeoning business of takaful, or Islamic insurance, to be marginalised as something separate from the large global insurance providers that now dominate the scene. "Takaful is not a ghetto and I don't like to work in a ghetto," says Mr Abouzaid, the chief executive of Takaful Re in Dubai, the first takaful reinsurer of its size in the world. "Takaful companies are mature companies. We are also part of the insurance industry and I think we are contributing to the development of the insurance industry."

In many ways he is right. According to a report last October from Swiss Re, the world's second-largest reinsurer, the takaful sector grew at an annual average of 25 per cent between 2004 and 2007, adjusted for inflation. The rest of the insurance industry grew at slightly more than 10 per cent a year in that period. But takaful's fast expansion has not come without growing pains. It still makes up a mere sliver of the global insurance pie, and only in the past five years has it begun to gain ground in the GCC, riding on the development of Islamic finance as a whole.

Figures on the industry are scant but one estimate last year said there was US$500 billion (Dh1.83 trillion) in Islamic bank assets worldwide, a small portion of the global figure. But Accenture, the global management consultancy, forecasts that household Islamic savings will amount to $24bn a year by 2020. "Takaful penetration is still marginal," Mr Abouzaid says. "It is still very small but definitely we are contributing to increase the penetration.

"In the past three or four years, all the new insurance companies in the Gulf area have been takaful companies. Nobody is starting a conventional company. It's a very simple strategy: if some segment of the population is reluctant to buy conventional insurance, why not provide takaful insurance?" Like many Islamic finance products, takaful first took hold in South East Asia, thanks to strong government support. In Malaysia, overall insurance penetration in 2006 amounted to about 5.4 per cent of GDP, well above the figure for the GCC. Insurance penetration in the UAE was just 1.53 per cent in 2006.

According to figures from 2005, Arab countries accounted for just 24.7 per cent of total takaful contributions, while countries in the Far East - including Iran - accounted for 75.1 per cent. But takaful is growing in the region, thanks to government encouragement and rising oil prices that are helping spread wealth through the region. Saudi Arabia's co-operative companies law, passed in 2004, required firms to operate along Islamic principles. Iran's companies are also legally bound to use Sharia-compliant financing, which has helped takaful penetration rates to rise there.

Yet central among its hurdles is the underdevelopment of the reinsurance industry of which Mr Abouzaid is a part. Insurance companies, especially new ones, cannot survive without a mechanism to offload the risks they take on to larger companies with larger asset bases to absorb claims. That is where reinsurance comes in. In the takaful sector, however, there are not enough large reinsurers to underwrite all the risks takaful companies take when they sell products.

Re-takaful has developed rapidly, industry insiders say, but most takaful companies still reinsure contracts using conventional, non-Islamic means. "We're looking to create that capacity or to find that capacity, and in the absence of finding that capacity in the market we have to rely a lot of times, and I'll state it as unfortunate, we have to rely on conventional reinsurance," says Abdallah Kubursi, the head of AIG Takaful, which is also based in Dubai and which started three years ago.

Conventional insurance is incompatible with Islam because of Sharia's prohibitions on overly uncertain transactions that involve a strong element of luck. Conventional insurers also put large pools of money in interest-bearing investments, which are prohibited by Islamic law. This state of affairs does not sit well with the Sharia boards that oversee takaful companies. But for now, Sharia scholars recognise that takaful-based reinsurance is not always available. They are pushing takaful firms to do their best to switch to re-takaful as capacity grows.

"It is not purely Sharia-compliant to reinsure using conventional reinsurance," says Michael McMillen, an Islamic finance expert. "However, these are early years in the growth of the takaful business and Sharia-compliant re-takaful is not always available. "Thus, the Sharia scholars with whom I have spoken on this matter have permitted reinsurance with conventional reinsurers in the short term. As re-takaful becomes available, use of those re-takaful providers would be required."

The development of re-takaful in the past three years, helped along by the emergence of companies such as Takaful Re, which was capitalised with $250 million when it started in 2005, is proceeding apace. Insiders say that for many types of risks, the capacity is already there in the re-takaful market. Motor takaful, for example, is almost completely covered by re-takaful companies. Capacity is still lacking, though, when it comes to large, extraordinary risks.

"When you look at lines of business like financial lines, crisis management, sabotage ? kidnap and ransom, directors' and officers' liability insurance, and so on, a majority of the re-takaful companies out there today do not really have capacity for those lines of business," Mr Kubursi says. For takaful to succeed in the long run, these issues must be worked out. It is unclear how long Sharia boards will tolerate the use of conventional reinsurance.

But takaful is growing so quickly in the GCC that it has become difficult even for large global insurers to ignore. Many global banks and financial institutions have been busy making partnerships with takaful providers to include Islamic insurance among the coverage they offer. Last week, Mashreqbank began offering a takaful-based savings scheme to its customers, and Dubai Bank announced a partnership to offer takaful products with Salama, an Islamic insurer based in Dubai.

Practitioners say the industry in the UAE could be helped greatly by a formal endorsement from the Government, or by laws that require companies to use takaful instead of conventional insurance. At the pace at which it is now growing, though, it may only be a matter of time before takaful becomes a global force, whether the Government helps or not. "In the Middle East we are still fighting, because there is a difference in terms of maturity between Malaysia and the Far East and the GCC," Mr Abouzaid says.

"Now we are working to convince the Sharia boards and the management of the companies to switch to re-takaful because, in fact, they have no choice. "From a Sharia point of view, they have to limit their use of conventional insurance to the strict minimum." afitch@thenational.ae

From Conquest to Deportation

Jeronim Perovic, Hurst

UAE currency: the story behind the money in your pockets
Paatal Lok season two

Directors: Avinash Arun, Prosit Roy 

Stars: Jaideep Ahlawat, Ishwak Singh, Lc Sekhose, Merenla Imsong

Rating: 4.5/5

Juliet, Naked
Dir: Jesse Peretz
Starring: Chris O'Dowd, Rose Byrne, Ethan Hawke​​​​​​​
​​​​​​​Two stars

What is 'Soft Power'?

Soft power was first mentioned in 1990 by former US Defence Secretary Joseph Nye. 
He believed that there were alternative ways of cultivating support from other countries, instead of achieving goals using military strength. 
Soft power is, at its root, the ability to convince other states to do what you want without force. 
This is traditionally achieved by proving that you share morals and values.

The specs

The specs: 2019 Audi Q8
Price, base: Dh315,000
Engine: 3.0-litre turbocharged V6
Gearbox: Eight-speed automatic
Power: 340hp @ 3,500rpm
Torque: 500Nm @ 2,250rpm
Fuel economy, combined: 6.7L / 100km
 

Other workplace saving schemes
  • The UAE government announced a retirement savings plan for private and free zone sector employees in 2023.
  • Dubai’s savings retirement scheme for foreign employees working in the emirate’s government and public sector came into effect in 2022.
  • National Bonds unveiled a Golden Pension Scheme in 2022 to help private-sector foreign employees with their financial planning.
  • In April 2021, Hayah Insurance unveiled a workplace savings plan to help UAE employees save for their retirement.
  • Lunate, an Abu Dhabi-based investment manager, has launched a fund that will allow UAE private companies to offer employees investment returns on end-of-service benefits.
Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
 
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
 
Round 3: February 7-9, Dubai Autodrome – Dubai
 
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
 
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
COMPANY PROFILE
Name: Almnssa
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THE LIGHT

Director: Tom Tykwer

Starring: Tala Al Deen, Nicolette Krebitz, Lars Eidinger

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Ali Kasheif, Salim Rashid, Khalifa Al Hammadi, Khalfan Mubarak, Ali Mabkhout, Omar Abdulrahman, Mohammed Al Attas, Abdullah Ramadan, Zayed Al Ameri (Al Jazira), Mohammed Al Shamsi, Hamdan Al Kamali, Mohammed Barghash, Khalil Al Hammadi (Al Wahda), Khalid Essa, Mohammed Shaker, Ahmed Barman, Bandar Al Ahbabi (Al Ain), Al Hassan Saleh, Majid Suroor (Sharjah) Walid Abbas, Ahmed Khalil (Shabab Al Ahli), Tariq Ahmed, Jasim Yaqoub (Al Nasr), Ali Saleh, Ali Salmeen (Al Wasl), Hassan Al Muharami (Baniyas) 

The%20specs
%3Cp%3E%3Cstrong%3EEngine%3A%20%3C%2Fstrong%3E2.3-litre%204cyl%20turbo%0D%3Cbr%3E%3Cstrong%3EPower%3A%20%3C%2Fstrong%3E299hp%20at%205%2C500rpm%0D%3Cbr%3E%3Cstrong%3ETorque%3A%20%3C%2Fstrong%3E420Nm%20at%202%2C750rpm%0D%3Cbr%3E%3Cstrong%3ETransmission%3A%20%3C%2Fstrong%3E10-speed%20auto%0D%3Cbr%3E%3Cstrong%3EFuel%20consumption%3A%20%3C%2Fstrong%3E12.4L%2F100km%0D%3Cbr%3E%3Cstrong%3EOn%20sale%3A%20%3C%2Fstrong%3ENow%0D%3Cbr%3E%3Cstrong%3EPrice%3A%20%3C%2Fstrong%3EFrom%20Dh157%2C395%20(XLS)%3B%20Dh199%2C395%20(Limited)%3C%2Fp%3E%0A
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The specs

AT4 Ultimate, as tested

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Stars: Ajith Kumar, Arjun Sarja, Trisha Krishnan, Regina Cassandra

Rating: 4/5

 

Fixtures and results:

Wed, Aug 29:

  • Malaysia bt Hong Kong by 3 wickets
  • Oman bt Nepal by 7 wickets
  • UAE bt Singapore by 215 runs

Thu, Aug 30: 

  • UAE bt Nepal by 78 runs
  • Hong Kong bt Singapore by 5 wickets
  • Oman bt Malaysia by 2 wickets

Sat, Sep 1: UAE v Hong Kong; Oman v Singapore; Malaysia v Nepal

Sun, Sep 2: Hong Kong v Oman; Malaysia v UAE; Nepal v Singapore

Tue, Sep 4: Malaysia v Singapore; UAE v Oman; Nepal v Hong Kong

Thu, Sep 6: Final

Racecard:

6.30pm: Mazrat Al Ruwayah (PA) | Group 2 | US$55,000 (Dirt) | 1,600 metres

7.05pm: Meydan Sprint (TB) | Group 2 | $250,000 (Turf) | 1,000m

7.40pm: Firebreak Stakes | Group 3 | $200,000 (D) | 1,600m

8.15pm: Meydan Trophy | Conditions (TB) | $100,000 (T) | 1,900m

8.50pm: Balanchine | Group 2 (TB) | $250,000 (T) | 1,800m

9.25pm: Handicap (TB) | $135,000 (D) | 1,200m

10pm: Handicap (TB) | $175,000 (T) | 2,410m.

Our legal consultant

Name: Dr Hassan Mohsen Elhais

Position: legal consultant with Al Rowaad Advocates and Legal Consultants.

Fight Night

FIGHT NIGHT

Four title fights:

Amir Khan v Billy Dib - WBC International title
Hughie Fury v Samuel Peter - Heavyweight co-main event  
Dave Penalosa v Lerato Dlamini - WBC Silver title
Prince Patel v Michell Banquiz - IBO World title

Six undercard bouts:

Michael Hennessy Jr v Abdul Julaidan Fatah
Amandeep Singh v Shakhobidin Zoirov
Zuhayr Al Qahtani v Farhad Hazratzada
Lolito Sonsona v Isack Junior
Rodrigo Caraballo v Sajid Abid
Ali Kiydin v Hemi Ahio

IF YOU GO
 
The flights: FlyDubai offers direct flights to Catania Airport from Dubai International Terminal 2 daily with return fares starting from Dh1,895.
 
The details: Access to the 2,900-metre elevation point at Mount Etna by cable car and 4x4 transport vehicle cost around €57.50 (Dh248) per adult. Entry into Teatro Greco costs €10 (Dh43). For more go to www.visitsicily.info

 Where to stay: Hilton Giardini Naxos offers beachfront access and accessible to Taormina and Mount Etna. Rooms start from around €130 (Dh561) per night, including taxes.

Squid Game season two

Director: Hwang Dong-hyuk 

Stars:  Lee Jung-jae, Wi Ha-joon and Lee Byung-hun

Rating: 4.5/5

<html><head><meta http-equiv="Content-Type" content="text/html" charset="UTF-8" /></head><body><!--PSTYLE=* Labels%3aFH Label 18 Sport--><p>Beach soccer</p><!--PSTYLE=BY Byline--><p>Amith Passela</p><p /></body></html>
MATCH INFO

Fixture: Ukraine v Portugal, Monday, 10.45pm (UAE)

TV: BeIN Sports

The bio

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Favourite place to travel: Home in Kuwait.

Favourite place in the UAE: Al Qudra lakes

As You Were

Liam Gallagher

(Warner Bros)

Hamilton profile

Age 32

Country United Kingdom

Grands Prix entered 198

Pole positions 67

Wins 57

Podiums 110

Points 2,423

World Championships 3